Strategy
ThyssenKrupp is facing up to the challenges of its markets and customers with strategic perspective and entrepreneurial dynamism. The reorganization makes us more flexible; our value-based management approach, the success of our cost-cutting measures and our value-enhancement program give us additional impetus.
Capabilities and strategic perspectives
As an integrated materials and technology group, ThyssenKrupp offers intelligent and innovative products for sustainable progress worldwide. From the start of the new fiscal year, the Group's activities and know-how are focused in eight business areas and combined in the Materials and Technologies divisions, replacing the previous segments.
- Strategic strengths of the business areas
- Major projects continuing flexibly
- Brazil: Vale increases shareholding
- Market entry in the USA stretched out
- Flexible startup also planned for stainless steel
- Stand-alone plan for Stainless
- New course set for shipbuilding
- Improved cost base increases competitiveness
Strategic strengths of the business areas
The Materials division focuses the Group's worldwide materials activities:
- The Steel Europe business area will drive forward our activities in premium carbon steel flat products, which extend from intelligent material solutions to finished parts. The product range includes custom tailored products made from steel sheets of different thickness, grade and finish. The ongoing development of new steel grades and products in joint R&D activities secures our strong position in this premium market.
- The Steel Americas business area is developing the American market for high-quality steel products. It includes the steelmaking and processing plants currently under construction in Brazil and the USA.
- As a world leading supplier of stainless steel, the Stainless Global business area specializes in stainless steel flat products and high-performance materials such as nickel alloys and titanium. The business area also includes the new stainless steel mill in Alabama, which is being built in close cooperation with Steel Americas. With an extensive network of production and sales companies and service centers, Stainless Global operates close to its customers around the world.
- Materials-related services, especially in Europe and the NAFTA region, are the core business of the Materials Services business area. We see good opportunities in integrated supply chain management: Carbon and stainless steel products as well as titanium, aluminum and plastics are delivered to customers on schedule, pre-processed as required.
The Technologies division brings together ThyssenKrupp's technological capabilities:
- With elevators, escalators, moving walks, passenger boarding bridges and stair lifts, the Elevator Technology business area keeps the world in motion. High quality, technological competencies and services such as maintenance and modernization secure the business area's market position and provide new opportunities for growth.
- The Plant Technology business area is a leading international supplier of chemical plants, refineries, cement plants and innovative solutions for the mining and handling of raw materials and minerals. The business area's plants and processes open up new possibilities for environmental protection and sustainable development.
- Specializing in innovative components for the automotive, construction and engineering sectors, the Components Technology business area has a broad and successful product range.
- The Marine Systems business area offers expertise, outstanding products and strong innovative capabilities in shipbuilding – from submarines with fuel cell technology to sophisticated research vessels.
Major projects continuing flexibly
We remain committed to implementing our strategic investments for the production and processing of flat carbon steel and stainless steel in Brazil and the USA. But we are responding flexibly to the changes in the economic framework conditions. The new plants for flat carbon steel are part of the Steel Americas business area, while the stainless production facility in the USA is part of Stainless Global.
Brazil: Vale increases shareholding
The ramp-up of the iron and steel mill in Brazil, which will produce 5 million metric tons of carbon steel slabs per year, has been rescheduled in line with falling demand expectations. The first production line with one blast furnace and one converter will start operation in mid 2010; as things stand today, the ramp-up of the second production line with the second blast furnace and the second converter is scheduled for 2011. We remain flexible in our planning to enable us to respond quickly to possible market changes.
The Brazilian iron ore producer Vale S.A. has increased its shareholding in ThyssenKrupp CSA Siderúrgica do Atlântico Ltda. – our Brazilian steel mill subsidiary – from around 10% to just under 27% at a price of €965 million. This step confirms the value of our investment and our industrial strategy. At the same time it further strengthens the basis for a long-term strategic partnership between Vale and ThyssenKrupp.
Construction work in Santa Cruz in the Brazilian state of Rio de Janeiro is in full swing. At the end of the fiscal year some 21,000 people were working on the site. The port terminal, materials handling facilities and sinter plant are almost complete. The power plant and blast furnaces will be technically complete at the beginning of 2010. The same applies to the ancillary facilities such as power distribution and water treatment and to other infrastructure facilities. Due to problems with supplier quality, reworking is necessary on the structural steel work in some areas. This is affecting the coke plant and the melt shop in particular.
At the end of September 2009 CSA in Brazil had around 1,400 employees. Further recruitment has been slowed in line with the later start-up date.
Market entry in the USA stretched out
Construction work on the new joint steel mill and processing plant of the Steel Americas and Stainless Global business areas near Mobile in Alabama/USA is also being adapted to the decline in steel demand. Construction of the carbon steel production lines is continuing as planned. The Mobile plant of Steel Americas will have hot rolling, cold rolling and coating facilities and will process slabs from the Brazilian mill into high-quality flat products. Hot-rolled capacity will be more than 5 million metric tons per year.
The project is largely on schedule, so we will be able to start production in the 2nd quarter of 2010. Until the Brazilian mill starts operations, the slabs will be imported from Germany. Given the fall in steel demand on the world market, we plan to extend the timetable for market entry, with production being ramped up over a longer period while retaining the flexibility to respond to changes in demand. At the end of the reporting year, around 4,500 people were working on the site.
In parallel with construction work we are preparing our market entry and sales plans for the ramp-up phase in line with the wishes of customers in the NAFTA region. For this, our sales experts are continuing to visit key customers in the target automotive and electrical sectors as well as steel service centers and the tube/pipe industry. Despite the changed situation on the world steel market, we are confident that our attractive product mix and our technological and logistical advantages over competitors will allow us to make a successful entry to the NAFTA markets.
Flexible startup also planned for stainless steel
As with the carbon steel operations, a flexible approach is being taken to our US stainless steel mill. Production will start in October 2010, initially with a reduced cold-rolled capacity of around 100,000 tons per year. The startup of the other units for stainless steel products will be spread out over a longer period, with flexible ramp-up possible at all times. That also applies to the startup of the melt shop, which was planned for early 2012 and may now be delayed by up to 24 months. Despite this, the scale of the overall project will be retained; once the US economy has recovered, the NAFTA market offers promising growth opportunities.
Stand-alone plan for Stainless
The Stainless Global business area will be developed strategically under a stand-alone plan. In the area of stainless steel we plan to consolidate and expand our position on our core European market. Our position as a global stainless producer will be strengthened by the gradual startup of our plant in the USA and the further development of the NAFTA market. In the area of nickel alloys and titanium, we will expand our capabilities in high-performance materials and build up a more customer-focused sales structure.
To achieve these objectives, Stainless Global is working intensively on programs and measures aimed at creating further flexibility in production processes, workflows and capital investments. This will enable the business area to respond swiftly to changes in demand and balance capacity utilization accordingly. Cost structures are also to be flexibilized further to make it easier to adjust to different market situations and enhance the business area's competitiveness.
New course set for shipbuilding
In the future, the Marine Systems business area will combine its sales activities for new-build submarines and surface vessels to better respond to customer needs and changing market conditions. We also aim to make our processes more efficient. To counter the overcapacities brought about by the fall in demand due to the financial crisis, Marine Systems and the wind turbine manufacturer SIAG Schaaf Industrie will pursue an innovative approach at the long-established Emden shipyard. This will focus on the manufacture of components for offshore wind turbines as a contribution to structural change in the region.
In October 2009, Marine Systems signed a memorandum of understanding with the Abu Dhabi MAR Group to establish a strategic partnership. The aim of the planned collaboration is to boost marketing opportunities for Blohm + Voss's naval surface vessels – frigates and corvettes – while securing shipbuilding employment in Germany.
Improved cost base increases competitiveness
At all levels of the Group we are working to implement our cost-reduction and restructuring programs efficiently. Together with the savings from the reorganization, the successes of the ThyssenKrupp PLuS program and the results of the restructurings, from 2010/2011 our cost base will be improved sustainably by €1.5 billion to €2 billion. This will strengthen the position of our Group on the world's markets.
Source: Annual Report 2008/2009, p. 82-85